Re-entering society can be a challenging time. Filing taxes may add to that difficulty. Here’s five things you need to know about filing taxes if you are a returning citizen or currently incarcerated.
1. You may be eligible for tax credits
Tax credits reduce the amount of taxes you owe and may give you a refund at tax time. Even if you are not required to file a tax return, you may still qualify for tax credits like the Earned Income Tax Credit (EITC) and the Child Tax Credit (CTC).
Income earned in prison does not qualify for the EITC or the CTC. You may still qualify for tax credits if you get income from other sources, such as income earned before incarceration or income earned by a spouse who is not incarcerated.
To claim tax credits, you will need to file your taxes. Even if you aren’t eligible for some tax credits, filing your taxes is useful. Your taxes serve as proof of income that you can use in the future for renting a home or applying for loans. It also provides a record of your work history which is needed to qualify for social security benefits.
2. You can still file taxes for previous years
If you did not file taxes in past years due to incarceration, you have three (3) years from the due date of your last tax return to claim any credits or refunds for which you may have been eligible.
As part of COVID relief, Congress issued three rounds of stimulus checks in 2020 and 2021. People who are incarcerated are eligible for these checks. If you missed out on your stimulus checks or didn’t get the full amount you qualify for, you can still claim the money as the Recovery Rebate Credit on your 2020 and/or 2021 tax return.
If you did not file taxes and owe money, you may have to pay penalties and interest. Doing this is helpful because if you qualify for tax credits in the future, and have paid the fees you owe, you may be able to get more money back. If you can’t pay the full amount of fees that you owe, you may qualify for a payment plan, tax debt settlement, or temporary collection delay from the IRS. Contact your nearby Taxpayer Assistance Center (TAC) or Low Income Taxpayer Clinic (LITC) for help. Learn more about filing your prior year taxes here.
3. There are ways to file your taxes if you are currently incarcerated
If your stay is temporary: File for a tax extension. The extension allows you to file after the tax deadline. Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return, will give you a six-month filing extension. You must file this form by the regular tax deadline, which is April 18, 2023.
If you are incarcerated for an extended amount of time: You have a couple of options. In-house tax or lawyer services may be available to help you with your taxes. Another option is to give Power of Attorney to someone you trust to file your taxes and take care of your finances. You must complete Form 2848, Power of Attorney and Declaration of Representative to give someone Power of Attorney. The form requires signatures from yourself and the other person. The signed form must be turned in with the tax return. Your Power of Attorney may have to be notarized (made official with the signature of a notary public) depending on state laws.
If you are filing with a spouse: Your spouse can fill out the tax forms for you and either bring or mail them to you for signing.
5. Free tax help is available
For free in-person tax services, Volunteer Income Tax Assistance (VITA) and Tax-Aide/ Tax Counseling for the Elderly (TCE) offer free tax help for people who earn less than about $60,000 a year. Accuracy is important: tax preparers at these sites are IRS-certified each year and all returns are double-checked by a second tax preparer. Tax-Aide, which is run through the AARP, mostly serves seniors – but they cannot turn younger clients away. VITA offers free tax help for workers of all ages. Find your local VITA site. VITA offers free tax help for workers of all ages. Find your local VITA site here, and find your local Tax-Aide site here.
For free virtual tax filing services, Code for America has teamed up with VITA to create a full virtual intake process for free tax help. Visit GetYourRefund to connect with an IRS-certified volunteer. They will help you prepare, review, and file your taxes. Code for America’s GetYourRefund service is free for those who earn less than about $66,000.
For free online tax preparation, MyFreeTaxes is a user-friendly online tool that helps you file your taxes for free. This is a good choice if you’re comfortable using computers and preparing your own taxes and don’t have self-employment income.
If you encounter hardship or difficulties in filing your taxes, contact a Low Income Taxpayer Clinic (LITC) for free legal help on tax issues. Contact your local Taxpayer Advocate Service (TAS) if you need help with specific concerns.